Italy approves 40% windfall tax on banks for 2023

italy-approves-40%-windfall-tax on banks-for-2023
Italy approves 40% windfall tax on banks for 2023

Italy has approved a one-off 40% tax on banks’ profits from higher interest rates, with the intention of using the proceeds to assist mortgage holders. This decision has caused banking shares to plummet. The increase in official interest rates has resulted in record profits for banks, as they have been able to raise the cost of loans while avoiding paying more on deposits. Other countries, such as Spain and Hungary, have already implemented windfall taxes on the banking sector. Italy will only apply this tax in 2023, targeting 40% of banks’ net interest margin, which measures the income derived from the difference between lending and deposit rates. Analysts at Bank of America estimate that the government could generate between 2-3 billion euros from this tax, which could cost banks between 2%-9% of their earnings.

As a result of this news, Italy’s banking index has experienced a sharp decline of 7.5% by 0727 GMT, with top bank Intesa Sanpaolo (ISP.MI) down 8%. Italy’s right-wing government has repeatedly criticized banks for not passing on the higher cost of money to depositors, but they only took action after the recent round of record earnings reported by banks at the beginning of August. Deputy Prime Minister Matteo Salvini expressed his concerns about the significant profits banks have been making and the failure to reflect this in the rates offered to depositors. He highlighted the large gap between the rates applied to loans and deposits.

In conclusion, Italy’s decision to impose a one-off tax on banks’ profits from higher interest rates aims to support mortgage holders. This move has caused a decline in banking shares. The government plans to implement the tax in 2023, targeting 40% of banks’ net interest margin. Analysts predict that this tax could generate between 2-3 billion euros, potentially impacting banks’ earnings by 2%-9%. Italy’s right-wing government has criticized banks for not passing on the increased cost of money to depositors, and Deputy Prime Minister Matteo Salvini emphasized the disparity between loan and deposit rates.

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Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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